The Association of Bureau De Change Operators of Nigeria (ABCON) has appealed to the Central Bank of Nigeria (CBN) to adjust and lower its applicable exchange rate downward below the N1,251/$ it pegged for the Bureau De Change (BDC) operators, as it has become expensive.
The request by the BDCs is coming amid historic development where for the first time in 15 years, the parallel market rate of N1,235/$ is lower than the official rate of N1252/$, which is the applicable buying exchange rate for the BDCs.
This was made known in a letter signed by the ABCON President, Aminu Gwadabe, to the Director, Trade and Exchange Department.
The association, which is an umbrella body for CBN-licensed BDC operators, insisted that the naira’s speedy recovery, which was faster than expected, had made CBN’s selling rate to BDCs very expensive and difficult to offload to retail end buyers that are trooping to the undocumented forex operators for cheaper rates and avoiding our services.
BDCs recording losses
ABCON further expressed concerns that many BDCs who funded their accounts for dollar allocations are yet to receive their allocation of dollars to meet the legitimate critical demand of their clients.
It lamented that this was due to the scrutinization of the BDCs’ documents for collection at the various designated Centers which invariably made the BDCs vulnerable to exchange rate risk and significant losses.
The association insisted that with the naira appreciating across markets, many BDCs who bought dollars at N1,251/$ will lose significant income and capital if they sell at the current open market rate of N1,235/$. It, therefore, highlighted the need for the call for a further review downward of the applicable exchange rate for the period and subsequently to continue to enhance naira sovereignty.
The statement partly reads,
- “We discovered a worrisome development where many of our members who paid for dollar allocations at N1,251/$ with a margin of 1.5% are yet to receive their disbursement. This is happening in the face of the prevailing open market rate of N1,235/$ which is lower than the authorized applicable exchange rate by the CBN to the BDCs.’’
Naira appreciation to continue
Despite this development, ABCON lauded the CBN leadership for the recall of BDCs into the official FX window and steps taken by the apex bank to strengthen the naira against the dollar and other global currencies.
ABCON said the positive fallout of the CBN’s efforts to restore naira’s glory came faster than expected, reiterating its commitment to working with the apex bank to realize the objectives of the government towards exchange rate stability and economic growth.
ABCON states that their forecasts in the ongoing market development indicate a willingness of the market to correct itself with a realistic price discovery as naira is predicted to continue to appreciate further across all markets with the increasing sources of foreign exchange inflows aided by the CBN policies.
It said,
- “It is in view of the above market developments that we write to appeal to your good selves for a readjustment and review downwards of our funding rate of the last tranche (2nd bidding) from N1,251/$ further down to reflect the current market rate discovery. This became imperative as it is only the consideration of the readjustment downward that will enable our members to upload their holding positions.’’
Other requests by ABCON
ABCON also requested that the process of payments at the various disbursement centers be reviewed in the immediate time to a medium time automation to achieve enhanced timely payments while also observing the spot nature of our transactions.
The association further requested that based on the offer and acceptance rule, the approval of refunds to those who are yet to collect disbursement having funded their accounts as it is the market that determines the rate presently be considered going forward.
ABCON also requested that the apex bank introduce a cut-off time for payments and collection of bids, adding that the current open-ended system for payments and collection of bids does not make for effective administration and control of the process.
- It said, “Consequently, many of our members are jittery to bid/collect their bid for fear of losing money as the current market reality has the potential to force us to sell below cost price and antithetical to recent market price discovery.’’
ABCON insisted that the disturbing exchange rate disparity can be addressed by a quick and decisive response of the apex bank, which will go a long way in bolstering BDC operators’ confidence in the ongoing intervention by the Central Bank of Nigeria as well as enhance their participation in the bidding process.
